Stacking: Meaning in a Merchant Cash Advance
Stacking is taking a new merchant cash advance while one or more are still active, so their payments stack on top of each other. Each new advance takes a later position, and many contracts restrict it.
What does stacking mean?
Say you already have an advance with a daily debit. A few weeks later, cash is tight, and another funder offers a second advance. Take it and you now have two debits coming out every day. That's stacking. Some businesses end up with three or four, each with its own payment, cost and funder.
Why does stacking matter to your business?
Stacked payments add up fast and can consume most of a business's daily cash flow. Each new advance tends to cost more than the one before, because the funder is behind others in line. Many first position contracts include anti-stacking clauses, so taking a second advance without permission can put you in breach. Stacking works only when the combined payments fit comfortably.
What's the way out of stacking?
When stacked payments get heavy, consolidation replaces several advances with one payment. The earlier you consider it, the more options you have.
Why does stacking happen?
Most stacking starts with a real need: a slow month, a big order, a surprise bill. The problem comes when the second advance is used to cover the first advance's payments. At that point, the advances are feeding each other. Recognizing that pattern early is the key to getting out of it.
Should you disclose it?
If you already have an advance and you're shopping for another, say so. Funders see the debits anyway.
Where will you see it?
In anti-stacking clauses, in underwriting when funders count the existing debits on your statements, and in our stacked payment calculator.
Which terms are related to stacking?
- First position
- Anti-stacking clause
- Reverse consolidation
- Funding position
- Payment load ratio
- Debt settlement company
The full list is in the glossary. Owners ask about this in Is an MCA renewal cheaper than the first advance?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.